Product X-547 is one of the joint products in a joint manufacturing process.Management is considering whether to sell X-547 at the split-off point or to process X-547 further into Xylene.The following data have been gathered:
I.Selling price of X-547
II.Variable cost of processing X-547 into Xylene.
III.The avoidable fixed costs of processing X-547 into Xylene.
IV.The selling price of Xylene.
V.The joint cost of the process from which X-547 is produced.
Which of the above items are relevant in a decision of whether to sell the X-547 as is or process it further into Xylene?
A) I, II, and IV.
B) I, II, III, and IV.
C) II, III, and V.
D) I, II, III, and V.

Question

Quizplus · Accepted Answer

The relevant items are the selling price of X-547, the variable cost and avoidable fixed costs of processing it into Xylene, and the selling price of Xylene. These factors help determine the incremental benefit of further processing. The joint cost is not relevant as it is a sunk cost.

Product X-547 Is One of the Joint Products in a Joint